Norway: SinOceanic Shipping ASA Enters into MOA to Purchase Container Vessel

SinOceanic III AS, a wholly owned subsidiary of SinOceanic Shipping ASA(“SinOceanic”) has entered into Memorandum of Agreement to purchase one VLCS of 13,100 TEU container capacity from Mediterranean Shipping Company SA, Geneva (“MSC”).

The vessel will be constructed and delivered by Hyundai Heavy Industries Co. Ltd., Ulsan, Korea in March/April 2012. The purchase price for the vessel is USD 156 million. A bareboat charter party has been entered into with MSC with duration of 15 years. The charterer has option to purchase the vessel after 12 and 15 years from the date of delivery. The total bareboat hire will be USD 255 million over the bareboat period, increasing SinOceanic’s total forward freight earnings on timecharter and bareboat basis to approximately USD 975 million over the next 15 years.

As partial consideration for the purchase of the vessel in accordance with the Memorandum of Agreement, SinOceanic III AS shall pay 10% of the purchase price in three tranches prior to delivery, i.e. USD 15.6 million. The first tranche of 5% is payable within 5 working days after all conditions of the Memorandum of Agreement have been lifted, the second tranche of 2.5% shall be paid within 31 October 2011 and the third tranche of 2.5% shall be paid within 31 December 2011. The remaining 90% of the purchase price is payable upon delivery of the vessel.

SinOceanic III AS will finance the pre-delivery payments with proceeds from loans from Oceanus International Investment Co. Ltd. (Oceanus). Oceanus is owned by HNA Group Co. Limited, China (HNA) which is the ultimate owner of 33,33% of the shares in SinOceanic. The loan is unsecured, without recourse to SinOceanic, and carries an interest rate at LIBOR + 3 % p.a. The interest will be aggregated up until maturity of the loans.

It will be necessary to raise new debt and equity in SinOceanic to finance the post-delivery portion of the purchase price for the vessel and to refinance the loans from Oceanus. The timing of raising debt and equity will depend on the prevailing market conditions, but is contemplated to take place before the delivery of the vessel.

The purchase of the vessel fits well into SinOceanic’s business model, pursuant to which the company contemplates to develop further into a substantial ship owning and shipping investment company over the next few years. SinOceanic’s strategy is to invest in container, tank and dry bulk vessels, and placing them on medium and long term charter contracts, thus enabling the company to pay regular substantial dividends to its shareholders.

Upon delivery of the vessel, SinOceanic will own container vessels with a total lifting capacity of 43.750 TEU after having invested more than USD 500 million into the container vessel space.

The transaction, with the support of HNA, will take SinOceanic a big step forward towards reaching the intermediate goal of owning container vessels with a lifting capacity of 100-120.000 TEU within 12 to 18 months.

[mappress]

Source: SinOceanic, August 17, 2011; Image: MSC